Retirement Crisis Looms as Americans Struggle To Save

Older Americans are teetering on the edge of poverty. One crisis could wipe out their nest egg and reduce all safety nets.

80% Unable To Sustain Financial Shock

A study by the National Council on Aging (NCOA) and the LeadingAge LTSS Center at UMass Boston finds that 80% of older Americans (47 million) continue to be unable to sustain a financial shock such as needing to pay for long-term care services and support (LTSS) or the loss of income due to divorce or widowhood.

Many seniors are struggling with the rise of inflation, the lack of an extensive security net, and the rising cost of medical costs, leading most boomers to spend more than they can afford. 

The 80%: The Continued Toll of Financial Insecurity in Retirement” Study looks at the total net value of all assets—housing, retirement accounts, income, and savings—of people age 60 and older by income quintiles and compares that with the cost of two years of in-home long-term care services and nursing homes.

“It is unacceptable that nearly all older Americans are one crisis away from plunging into poverty after working their entire lives and often saving a nest egg that is then wiped out by the cost of care,” said Dr. Susan Silberman, NCOA Senior Director, Research & Evaluation. “This is a snowballing crisis given that the older population is growing rapidly. The cost of care is staggering, and older adults’ resources are insufficient.”

Among the Key Findings:

  • 20% of older households (approximately 11 million) have no assets to draw upon to withstand a financial shock.
  • 21-80% have modest assets but would still be unable to afford more than two years of nursing home care or four years in an assisted living community.
  • The total net value of household assets is $39,500 for those in the 21-40% quintile and $150,000 for those in the 41-60% quintile.

Previous research found that over half of adults age 65 and older will need LTSS for less than two years, and about one in seven will require care for more than five years. In 2021, the median yearly cost of a private room in a nursing home was $108,405, and that of a home healthcare aide was $61,776.

Since Medicare does not cover LTSS costs, older adults and their families must shoulder this financial risk or spend down their assets into poverty to qualify for social safety net programs such as Medicaid.

Help for Families

Danielle Miura, a CFP who specializes in helping families navigate the struggle of caring for the elderly, advises that preparing for these scenarios sooner rather than later is key.

Suggestions for Seniors

Seniors can do a few things to prepare for the inevitable aging process, she says.

  • Delay long-term care by adding aging-in-place modifications, like grab bars, night lights, ramps, and smart home devices.
  • Build social connections within your community of people that you can rely on, like neighbors, friends, and organizations.
  • Utilize organizations like Area Agency on Aging to learn about resources in your community.
  • Discuss your wishes, finances, and medical history if you haven’t already. If you don’t have the finances to care for yourself, you will need to disclose how someone else can take care of you.
  • Set up a consultation with an elder care attorney to understand your qualifications for Medicaid.
  • Include your power of attorney in conversations with your financial professionals, doctors, and attorneys as early as possible so they can understand the complete picture of your situation.
  • Medicare will not pay for long-term care. However, they will cover a short-term assisted living stay or for physical therapists and nurses to visit their home for a limited period. Utilizing these resources can help seniors recover from falls and get care while family members decide the next long-term care steps.

Steps for Family Members

Family members can take steps to prepare themselves and their loved ones as well. She advises them to do the following as they prepare to take care of aging parents.

  • Caring for older parents can make your life harder if you have unresolved family conflicts, difficulty standing up for yourself, or trouble setting boundaries. Now is the time to work with a therapist to tackle these issues and gain confidence in finding your voice.
  • For example, if you struggle with asking for help, now is the time to figure out why and start practicing. Now is the time to set up a routine to improve your health. For example, find a workout routine you enjoy, get into the rhythm of eating healthy foods, and get an annual check-up. Putting yourself as a priority is an essential habit before becoming a caregiver.
  • Take active steps now to limit the stress you may have later. Start by analyzing your emergency fund and current liabilities to determine if you need to add additional funds or pay off high-interest debt. Before taking care of someone else financially, ensure your financial well-being is being taken care of.
  • Understand your options. For example, learn the FMLA process, research government programs, and analyze your finances.
  • Advocate for nonprofit and government programs that provide resources for caregivers, like paid FMLA, mental health programs, and respite care.
  • Have the “long-term care talk” with your loved ones; here are some questions to get you started:
    1. I found a recent article in the news about the shortage of nursing home care staff. Have you heard about this?

    1. My friend’s mom recently fell and broke her hip. She has in-home care caregivers while she recovers from surgery, but the cost is $5,000 a week. Have you thought about this? How would you pay for the cost?

    1. If you have to stay overnight in a hospital, what items would you like me to bring to the hospital, who would you want me to contact, and where are your essential documents? What role would you like me to play in taking care of you?

    1. If you have to pay a large medical bill, where are funds available if these uncertainties happen?


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This post was produced and syndicated by A Dime Saved. 

Hi! I am a millennial mom with a passion for personal finance. I have always been “into” personal finance but got inspired to start my blog after a period of extended unemployment. That experience really changed the way I viewed my relationship with money and the importance of accessible personal finance education.